Eritrea – Master of deceit

Intergovernmental Authority on Development (Igad)’s meetings are usually run on consensus and participants have no reasons to fight over issues. Not so during the meeting held in Addis Ababa in early July. Kenya’s President Mwai Kibaki chaired the summit which was devoted mostly to drought, security and development in the Horn of Africa. When discussing issues of security, the well mannered Kibaki sounded a stern warning to Eritrea, surprising most of the participants. All understood that there must have been more to the issue than the government was revealing to the public. Kibaki’s warning comes merely weeks after Ethiopia’s Prime Minister Meles Zenawi warned that his government would use ìall possible meansî to depose Eritrea’s strongman Isaias Afewerki. Eritrea and Ethiopia are locked in a bitter fight about their common border and other issues, so no one thought much of Zenawi’s outburst.

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At the beginning of August, the UN Monitoring Group on Somalia and Eritrea released a detailed report. The report substantiates the accusation that Eritrea is financing terrorist groups in the region, especially Somalia’s Islamist militia Al Shabaab. Besides financing activities and individuals connected to terror organizations, Eritrea is also supplying weapons to Al Shabaab and other groups, contravening an arm embargo imposed by the UN.

How can one of the poorest countries in the world dish out millions of US$ to armed groups? The answer is simple. Senior officials of the Eritrean government and of the ruling People’s Front for Democracy and Justice (PFDJ) run a double administration. On the one side there is the formal state administration which involves transactions almost exclusively in nakfa, the non-convertible Eritrean national currency. In this system, cash is always hard to come by, and very little hard currency is available for state’s projects. On the other hand, the very same state machinery runs a parallel economy. This is largely secret and exclusively in foreign currency. The Un Report states ì… the most significant source of revenue for PFDJ is the excise of a 2% income tax on Eritrean nationals living abroad. An estimated 1.2 million Eritreans – or 25 per cent of the total population – live in the diaspora … the Government of Eritrea is estimated to raise tens – and possibly hundreds – of millions of dollars on an annual basis. Those unwilling to pay these taxes may have entry rights into Eritrea denied, property in Eritrea seized or family members in Eritrea harassed. … these hard currency deposits are managed by PFDJ, under the direction of Hagos Gebrehiwot, and not through State institutions. Taxes collected this way are remitted to the accounts of different Eritrean embassies abroad and thereafter transferred from embassy account to embassy account, depending on operational needs, or transferred to privately held offshore accountsî.

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The Reports explain how private individuals are used to co-ordinate cash collection and transfers on behalf of the PFDJ. Many of these individuals have dual citizenship and often operate small front businesses on behalf of the party. The hard currency transfers they make through money transfer companies are kept under $10,000 to avoid triggering suspicious transfer reports. Some are also used as ìcash mulesî. They physically carry hard currency across borders, protected by Eritrean diplomatic passports. Cash is sent to Dubai, the financial hub of the Eritrean informal economy. Beneficiaries of the funds maintain accounts with the Standard Chartered Bank and Commercial Bank of Dubai. The report notes that ìmultiple Eritrean sources in Dubai and the United States have informed the Group that individuals and enterprises on the [recipient] list are affiliated with PFDJ and may play a role in laundering its fundsî. From Dubai, the hard currency stream is directed towards Nairobi, where the Eritrean embassy receives cash into accounts under its control.

The Eritrean embassy in Nairobi is thus a central logistical hub from which intelligence activities related to Somalia are financially and logistically supported, and payments to individuals with links to Al Shabaab are co-ordinated. The Report states that ìan Eritrean businessman, who works with the government of Eritrea and has provided other reliable information to the Monitoring Group, has confirmed that the amount disbursed in Nairobi is roughly $80,000 per monthî. The Report publishes documents relating to payments received directly from the embassy of Eritrea in Nairobi, including payment vouchers marked ìState of Eritrea,î cash receipts marked with Tigrinya and Arabic lettering and the emblem of the State of Eritrea, as well as tabulated records of payments.